529s offer families the opportunity to save for their or their children’s education on a tax-advantaged basis. 

And now after more than 25 years in existence, 529s have a lot more applications for your audiences than visions of ivy walls and baby gifts.

They can now be used for a much wider range of educational and career training programs, including registered apprenticeships. And this in turn makes them useful for family members of all ages.

The need for flexibility in higher ed was cited by the Georgetown Center on Education and the Workforce’s (CEW) 2023 report What Works: Ten Education, Training, and Work-Based Pathway Changes That Lead to Good Jobs, which offers several layered pathways to well-paying jobs by age 30. These might combine entering a certificate or associate’s degree program or working in a STEM occupation on the way to a bachelor’s degree by age 26.

“Today both children and their parents are incorporating higher education throughout their lives, and use their 529 savings plans to fund it,” says College Savings Foundation (CSF) Chair Vivian Tsai.

To bring your audiences up to speed on how 529s work and who they work for, see CSF’s guide for “Seven Tips for Savvy Savers”:

1) 529s fund a wide variety of higher education and career training options.

Thanks to a variety of Congressional enhancements, 529 savings can be used to pay for a broad range of higher education choices. 529s allow savings to grow federal-tax free (and 30 States offer a state income deduction or tax credit) when they are used for “qualified” education tuition or expenses, such as room and board, computers and software.

In addition to traditional 4-year public and private colleges, they can also be used for community colleges, career and technical schools, certain vocational schools and registered apprenticeships.  The full lists of “qualified” programs approved by the Department of Education and are found on CSF’s website.

The variety Is vast – think culinary arts or night classes for a member of the family at a vocational school.

2) What may be next for 529 saving:  Workforce Training and Credentialing

Looking forward, U.S. Representatives Abigail Spanberger (D-VA-07) and Rob Wittman (R-VA-01) have put forth a bipartisan bill giving individuals the ability to use their 529 savings plans to cover the costs of workforce training and credentialing programs that are approved under the federal Workforce Innovation and Opportunity Act or are approved by national accrediting organizations widely recognized as providing reputable credentials in the occupation. 

This bill, called the Freedom to Invest in Tomorrow’s Workforce Act, would address credentialing for “middle-skill” jobs, which require more than a high school education but not a bachelor’s degree, and comprise a large component of America’s labor market. Additionally, the bill would allow students to use their 529 funds to pay for associated costs related to certification exams and maintenance of certification credentials, allowing lifelong students to upskill and reskill throughout their careers.

3) 529s are for everyone in the family.

529s can be used to save for the higher education needs for anyone in the family. In CSF’s most recent survey of 1,000 parents, 86% said their kids will need to continue their education or acquire new skills throughout their lives; and 41% said they need it for themselves. One-third of all parents said they know they can use 529s for their own education, and one-in-five said they were already using them for this reason or plan to do so.

And if a child or other beneficiary changes their mind on their higher education goals, gets a scholarship or otherwise doesn’t need the 529 plan, 529 accounts can be can be transferable to different beneficiaries – to include parents or cousins.

4) Saving is still a powerful tool against debt.

With student debt currently at $1.76 trillion, there’s no question it takes a bite out of a family’s finances. Georgetown CEW found that the share of households who have educational debt has risen from 15% in 1989 to 43% in 2019 – and the median loan debt has risen from nearly $8K to $26K over the same period.

Saving – preferably early and often – is a proactive strategy in reducing dependence on student debt. A general rule of thumb shows that 18 years of saving $100 a month will earn $35,000 in savings over time; compared to borrowing $35,000 which will cost $52,000 over 10 years to pay back.

CSF’s survey of parents found that parents agree that saving over time is important. Nearly a third, 29%, were saving in a 529 and three quarters of them were doing so through recurring – annual, quarterly or monthly – contributions. 

5) Consider a portfolio selection tool in turbulent markets.

529 programs offer an array of investment options across the risk/reward spectrum, which can help savers navigate all kinds of market conditions. For investors concerned about taking on a lot of market risk there are conservative options that offer stable value funds, FDIC-secured savings accounts or money market accounts. There are also options that are diversified across a variety of asset classes that automatically get more conservative as the date of enrollment approaches. Other common options in the marketplace also include managed account assistance or other, all in one, asset allocation funds that can assist you in building a portfolio to a risk profile that you are comfortable with. That said, for those investors that are not comfortable tending to their own investments, most 529 plans also offer programs that can be used in conjunction with a financial professional, who can help with professional guidance to meet the investor’s goals.

6) Look for deals – such as incentives, award programs and employer matches. 

Many states offer incentives to open a 529 plan, such as Massachusetts, where every child resident is eligible to receive a $50 deposit into a MEFA U.Fund 529 College Investing Plan within one year of their birth or adoption. Colorado’s residents are eligible for a free $100 contribution to the CollegeInvest account of a child born or adopted in Colorado on or after January 1, 2020, followed by a match of parent/guardian contributions of up to $500/year for 5 consecutive years.

7) Unused 529 savings can be rolled over to a Roth IRA

Thanks to SECURE 2.0, beginning in 2024 beneficiaries of 529 accounts will have the option to roll over up to $35,000 over the course of their lifetime to their Roth IRA. Rollovers are subject to Roth IRA annual contribution limits, and the 529 account must have been open for more than 15 years.

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